What Is Supply And Its Relation To Demand

BANKING AND FINANCE, ACTIVELYSHARE.COM — Supply is a term that cannot be separated from economics. Supply or demand is a basic law in the science.

What is supply ( supply)? How does it relate to demand? Here’s the explanation.

What Is Supply?

Supply is one of the fundamental concepts in economics that describes the specific quantity of goods or services available. Supply can be related to the number of products available at a certain price displayed on a graph.

Supply is closely related to demand related to goods or services at a certain price. The supply provided by producers will increase if the price also increases, because each company seeks maximum profit.

When determining the quantity of goods, manufacturers usually take into account the following factors.

1. Manufacturer’s Desire To Provide Products

In providing the product, producers will take into account the demand or demand from consumers, the development of the price of the product they want to sell, as well as the tax from the product.

2. Product Inventory In Warehouse

The next factor is how quickly the product can be produced to fill inventory in the warehouse, how efficient the production process is, and the readiness of human resources and natural resources in producing.

3. Ability To Sell Products

In selling products, manufacturers must pay attention to several things. Starting from legal aspects such as legality and copyright, to logistical needs when selling.

Please to also read Demand Definition & Factors Affecting It

Understanding The Basic Laws Of Supply

Supply and demand is the basis of the modern economy. Each product or service specifically has its own pattern of supply and demand based on price, usability, and personal preferences of its users.

If someone has a demand for an item and is willing to pay, the supply will be increased by the producer. While supply increases, the price will fall to the level of demand .

Ideally, the market will reach an equilibrium point where supply equals demand (no oversupply or undersupply) at a given price point. At this point, the utility of the goods to the consumer and the producer’s profit is at its maximum.

The concept of supply in economics is very complex with many formulas, practical applications, and contributing factors. Supply can refer to anything that is in demand ( demand ) that is sold in a competitive market. The term supply refers to many goods and services.

One important aspect that affects supply is the price of goods. In general, if the price of goods increases, the supply will also increase.

Prices of related goods and their inputs (labor, raw materials, etc.), also affect supply . Because these factors also affect the price of goods sold.

The production situation of these goods is also very significant. For example, technological sophistication allows for increased production capacity.

Regulations and government related to the economy can also affect the supply and the number of suppliers or suppliers. This affects the number of competitors in the industry. An example is environmental law where the extraction of petroleum is regulated which will affect the supply of petroleum.

Law Of Supply And Demand

In economics, the law of supply and demand . According to the law of supply, if the price is higher then the supply of the product will increase. Meanwhile, according to the law of demand, if the price is higher then consumers demand less supply of the product.

These two laws are related in determining the actual market price and the amount of goods traded in the market. Factors that affect supply are production situations such as weather, availability of materials, and supply chain capabilities that can affect supply .

The equilibrium price point can be reached when all supplies are sold and consumers acquire the goods demanded. At a certain point, the quantity of goods brought to the market is fixed. In this case, the supply curve is vertical while the demand curve is downward sloping, due to the law of diminishing marginal utility.

In accordance with the concept of demand, producers cannot charge prices far above what the market can afford. But over time, producers can adjust the amount of supply to the market according to the price that is predicted to be borne by the market.

In this way, an upward sloping supply curve will lead producers to expect to incur additional costs. They will be willing to make more products and supply them to the market.

At the same time, the demand curve will be downward sloping. At one point, the two curves will intersect.

If this point is reached, the market price will be able to encourage producers to bring supply to the market at a price that consumers can afford. In this case it can be called supply and demand in a balanced position.

Please to also read Supply And Demand Definition, Its Factors & Examples

Shifts And Movements In Supply

Movement refers to a change in the curve. On the supply curve, the movements that appear show a consistent relationship.

Movements in the supply curve can occur when the price of a good changes and the quantity available changes. That is, a movement occurs when there is a change in the quantity supplied due to a change in price. And vice versa.

Meanwhile, shifts in the supply and demand curves arise when the quantity of a good causes a change even though the price is the same. A shift in the supply curve indicates that the curve has changed, meaning that the quantity supplied is affected by something other than price.

For example, there is a natural disaster that causes production to stop.


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